Transmissions of return between Shanghai and Hong Kong equity market

The paper makes an empirical study on shock transmission of return between HK and Shanghai equities markets by using methods of SVAR, Bootstrapping and Impulse Response curves on the basis of comparison of synchronous and asynchronous effect,. The author finds that reaction of shanghai equity market to the shock from Hong Kong equity market is 2.69%, while investors in Hong Kong equity market can absorb 2.18% information from the Shanghai equity market. the degree of mutual influence information transmission is weaker among two markets. In asynchronous (lag 10) information transmission between two stock markets, shocks from the Shanghai equity market lead to changes of daily return of HSI by 4.41%, while shocks from the Hong Kong equity market lead to changes of daily return of Shanghai Composite Index by 2.78%. The proportions of the interpretation of information transmission over the same period account respectively for non-synchronous (lag) information transmission effect by 61% and 78%. Therefore synchronous information transmission model which is more time-sensitive is a better alternative of non-synchronous model. The results are helpful to capture the market microstructure of two markets and guide stock trading of investors.